Transcripts For CNBC Power Lunch 20240622

Volatile month for equities. Why the s p could rally another 9. 5 from now until the end of the year. They are the most loved stocks on wall street and apple is not one of them. Weve got the list for you. We begin with what could be a major breakthrough in the battle to contain ebola, a vaccine being developed in record time proving to be highly effective in fighting or warding off that deadly virus. Shares of the two Companies Involved in the Drugs Development are moving higher at this hour. As you see it there, newlink genetics and merck. Cnbcs pharma expert meg tirrell with the very latest. That vaccine being developed by merck has shown to be 1 00 effective in preventing ebola. According to a interim analysis of a late stage study being conducted in guinea. Experts say the results need to be confirmed and the studies are ongoing but they call the news encouraging with the w. H. O. Declaring the world is on the verge of an effective ebola vaccination. It was used in the 1970s to eradicate smallpox. They vaccinated more than 4,000 close contacts of almost 100 ebola patients in order to gauge whether or not the vaccine was working. Half the people were vaccination napted three weeks after being identified, the others vaccinated immediately. What they found was that 16 people in the delayed group developed ebola after that time compared with zero in the immediate vaccination group. Now they are changing the study protocol to immediately vaccinate all participants. Next steps are pro tension licensing by regulatory authorities and the timing of that is uncertain. It could lead to potential stockpile is of the sacks down the road. Public Health Experts say it would probably only be used on people at risk of ebola. Glaxosmithkline and Johnson Johnson are still testing vaccine is as well. Thank you, meg tirrell. It is the last trading day of the month. What a wild ride july has turned out to be the s p ending up more than 2 . Chinas shanghai plunging stocks there posting their biggest monthly loss in six years. Gold also continuing to lose its shane down 6 in july. So what does august look like . Dominic chu is here with our if i only knew what it was going to be. What we do have is a historical look at what has been the case for august over the past five years. We looked apartment the last five years because theyre more indicative of the current environment. If you throw in what happened during the financial crisis youll get a whole bunch of rather skewed numbers to the downside during the great recession. August from the s ps point of view, first of all if you look at the s p seasonally just accounting for the last five years, recent history, on average were down by 1. 5 for the s p. Not a great seasonal time for the stock market at least as of late. It is only positive 40 of the time. If you look at some of the star performers and the worst performers Keurig Green Mountain on average has gone up by 11 . Its positive 100 of the time 5 for 5 over the last five years. Interesting because keurig has been on a very highprofile stock slide over the past of theeight, nine months. Other parts of the market as well, china, fxi in particular. This china etf. On average goes down by 3 . Its been positive only 1 of the last 5 augusts. Compare that to the shanghai composite. Down by. 5 and it is positive 60 of the time. Well finish off here with a look at an interest region commodity play. You see for the china etf, thats that. For gold on average it is up by 5. 5 . Positive 4 of the last 5 years and the gold mining etf has been a star performer during that last five years as well during the month of august. Gold prices have been on a steady decline. Perhaps a buying opportunity. But again recent history shows gold has tended to do well at least over ot last five years. Yes, i know it is a limited data set but still perhaps more indicative of the current market and economy. What about the socalled summer slow . The fact that during obviously august there would be could be a number of Market Participants off taking their vacations. Does it have any skew on the Market Performance we get . It wont because all of of that stuff goes into the performance. What you might see is a little bit more volatility because of thinner traded markets. There arent as many people engaged in the activities around stock trading during that time. Volume wise yes tends to die of during the summer mornts. Thats no secret. But whats interesting is whether or not we do see reversals on some of the trends weve seen of late. Gold prices interesting. A real pronounced down trend. Maybe you get a bit of a bounce. Keurig Green Mountain. It was a star stock over the last four five years. Just over the last ten months weve seen that steady slide. Perhaps some people looking for a possible buying opportunity. Thank you very much. Great stuff. Shares sf exxonmobil and chevron taking a hit. Down close to 4 each. Both stocks weighing on the dow right now. The oil giant missing profit estimates and a really big miss for chevron. Jackie deangelis breaking down the results. Good afternoon. When Big Oil Speaks investors listen. Right now the news not so encouraging. Exxonmobil reporting its worst quarterly profit in nearly 13 years. Chevron seeing profits plunge triggered by impairments in charges based on lower oil prices. Exxon noted that higher Profit Margins from refining did not help with its upstream business. Thats the exploration and production side of things. Also the Company Making a move to conserve cash. This is typically a sign to investors that it doesnt think that oil prices are going to rebound any time soon. The company also planning to scale back its share of buybacks. Investors typically do not like to see that. Lets switch gears, talk about chevron. 2 billion in impairments. 670 million in charges related to project suspensions and adverse tax effects for this company. The company also saying that these charges were triggered, as i said by a low price environment for oil. Cost cutting continues for both. They are trying to get their cap x numbers down. They both cut their cap x year on year for the quarter. And also these companies both suffered in todays session. Multiyear lows, as you had said, is what we saw earlier today. Year to date we are seeing doubledigit losses for both of these. So the question is what does this mean for oil prices . Traders are actually really looking at these reports to get some indication. Theyre telling me the downside bias remains. Theyre looking at year to date lows as the next stop that was 43. 46 what we saw this year. If we breach those levels we could be talking about lows we havent seen since 2009. Oil trading around session lows 47. 29. Traders did not like what they heard. Back to you. Jackie thank you. Lets go over now to dominic chu with news from the oil patch. So following jackies report if it is friday it must mean rig count friday. Right now Oil Drilling Rigs in north america for the United States up five to 664 total rigs. Again, u. S. Oil rigs acted as measured around counted by baker hughes up five to 664. To put that in more context though, we are still down 909 rigs over the same time last year. Again up five this week over last week. Still down 909 over a year ago. Broader context is Oil Production stays near record highs but is showing signs of perhaps plateauing. Again, well keep an eye on what happens with oil prices as we see these rig counts come in like this. Thank you. To reiterate, energy the shares there are underperforming today but the Energy Sector is still up over the course of the week. As for the headlines, new rub remembermaid beating earnings estimates and beating outlook for the full year with growth in areas like baby and school products. Shares up by 1 . Western union reporting better than expected profit. Money transfer company also boosting its full year forecast thanks to strong growth into its online business. Shares up by just over 7 . This is a stock with a whole lot of fizz. Shares of cocacola enterprises, the bottling company, soaring 15 to alltime size the wall street journal says. The bottler is in talks to merge with two european cocacola bottler. Shares up 8 . In parts of europe uber is making a big bet on india. The Ride Sharing Service announcing it will invest 1 billion there over the next nine months. Thats fast spend. Uber plans to improve operations expand to more cities, develop new products. India. Last month uber announced a billion dollar investment in china. Over the past six months innovators from across the country have been competing to come up with the next big thing to secure Americas Energy future. The prize, more than 175,000 to be split among three finalists. Lets meet one of those finalists. Morgan brennan is live at the safe Energy Security prize competition in charleston south carolina. Hi, morgan. Reporter hi, tyler. Thats right. We are at safe Energy Security prize event here in charleston. You can see behind me it is a packed house. Is everyone having a good time so far . So its a great friday if youre in charleston. Joining us our first finalist. He is the creator of free wire technologies. Now you have designed a device a machine here thats called the mobi electric vehicle charger. Lets talk about it. Thank you, morgan. So this is the mobi charger. It is a mobile electric vehicle charging station. What that means is you dont need infrastructure and you dont need a big construction project to get electric vehicle charging on site. Whats really fascinating is whats inside. What we use our second life electric vehicle batteries, meaning that morgan youre driving your chevy volt and you drive it for three years, you turn it in this a lease. What happens to those batteries . We take them and we make these really interesting products from them. This one allows you to get vehicle charging anywhere but the most fascinating one we have is something called the mobi gen. A system that replaces diesel or gas jaen gas again rategenerators. This can charge six vehicles before it needs a recharge. To recharge you just plug it into a wall outlet or into your drier outlet or even into another charging station. To wrap this interview up youre already deploying these. You already have customers. Thats right. We have five deployed at linkedins campus in mountain view. Some of these Large Companies love what were doing because we have the connection to the customer and we know exactly what they need. Free wire technologies. Mandy, back over to you. Very cool stuff. Well get back to you very shortly with the next finalist. It has been called americas greece. Puerto ricos debt threat. A big weekend for its bonds. Wall street is bracing for a default. What is at stake . Next. Plus check out transports this week rallying almost 4 . What is that saying about the overall stock market . Get ready to listen in. Are we headed higher . Well try and find out. Whoa what are you doing . Putting on a movie. Im trying to watch the game here. Look i need this right now ok . Come on i dont want to watch that. Too bad this is happening. Fine, what if i just put up the x1 sports app right here. Ah jeez its so close. He just loves her so much. Do it. Come on. Do it. Come on yes awww, yes that is what im talking about. Baby. Call and upgrade to get x1 today. Welcome back to power lunch. Shares of ocwen shares down. Downgraded to neutral from a prior buy rating saying full year results are expected to come in lower than expected. The stock is tracking for its day since midjanuary. Dom, thank you. Another debt deadline this time it is not greece. It is puerto rico. There is a lot at stake for investors this weekend. Check out the puerto rican 35year bond. Yields down about 20 year to date. Kate kellys been all over this story from the beginning. A critical few hours ahead of us kate. Absolutely tyler. Four puerto rican borrowers are due to make debt payments tomorrow. Whether they can all do it is not a sure thing. Some 700 million is due august 1st to creditors to the islands tax authority. Just hours ago we learned that the Government Development bank which owes 169 million tomorrow is posting that money on time. But questions linger over its subsidiary unit the Public Finance corporation which is widely expected not to pay on time. If the corporation doesnt make its debt payment as expected by early next week ratings agencies are likely to throw it into a state of default even though technically speaking it is merely a nonpayment due to lack of available funding. But it is bad for the island citizens who make up threequarters of the ownership of the bonds most likely to go unpaid. What theyll do from here not clear. Lawsuits are always possible but in the meantime a restructuring in which the borrower gets a debt break and the investors get something for their money may be the more viable option. In terms of the bigger picture, there is talk of reinstating a chapter 9 bankruptcy option for the puerto rican entities as well as establishing a financial control board. A number of options on the horizon there. Not clear what there is the political will to do. You said threequarters of these bonds are owned by puerto rican citizens. Are they mostly in retirement accounts or are they on the bonds a bunch in retirement accounts. Some individuals. Some via credit unions. It is hard to know exactly. This information isnt easily publicly accessible but it is a mix of sort of indirect and direct ownership, what analysts have told us. In the next halfhour, blackrocks head of Municipal Bonds peter hayes will join us. Well find out whats at stake for his investors and where he is looking for yield these days. Were going to tell you why analysts are bullish. Transports rallying this week by over 4 . Are we headed higher . Dont go away. Can a business have a mind . A subconscious. A knack for predicting the future. Reflexes faster than the speed of thought. Can a business have a spirit . Can a business have a soul . Can a business be. Alive . Welcome back to power lunch. Shares of fluor are down 8 . The Second Quarter profits fell due to weaker demand. The Company Also Announced its agreed to sell half of its spanish operations to a leading spanish construction company. At least six brokerages have cut their price targets on the stock to as low as 52 a share. Shares are down 22 so far this year. Lets look at the transports. The dow jones transports mr. Inis a that up 4 this week. What does that really tell us about the overall markets . Is this a leading indicator suggesting that stocks will continue to go up from here . There, as you see, almost four times higher this week ron, in gains than the dow industrials. What does this say to you . We obviously Pay Attention to the transports when they go down or they diverge. Right. They diverge much more dramatically earlier in the year. There was a ten percentage point gap between the two not too long ago. I think theyre doing better because oil prices are falling, which is a sign of economic weakness. While their cost structure may benefit from Falling Oil Prices im not sure it carries the same weight necessarily as it would this is kind of a head fake then. It is. I dont think you can ever take dow theory in isolation. The underpinnings in technical terms has stalled out. Highs, lows exploded last week. Its a good sign a relatively positive sign if you are a dow theory fanatic. I brought it up in recent months that it was something to watch but again it might just be the movements in oil prices that are just dragging transports along for the ride. Dont read too much into it. Im much more concerned about the technical deterioration inside the market itself the lack of leadership. Narrowness of the leadership. Very narrow rally. Again when you see things like the market internals roll over as they have i think you have to take everything together as opposed to just looking at one thing in isolation. You might be the only one in the world who would have seen Something Different in yesterdays statement or wednesdays statement from the fed. Is there anything that changes your view about when an Interest Rate hike i think they tablded september. I think Steve Leisman was kind of the same mind. I tweeted that i was not in line with conventional wisdom that september is necessarily on the table. If we get strong job reports over the next two months that could change but it did seem like their statement i dont think the fed wants to surprise anyone. I dont think theyre being could i by any stretch of the imagination. I think when you look at that statement, they didnt make a definitive move to suggest that september was liftoff. Were really really ready. I dont think theyre going to do anything until they tell the market directly that theyre going to do it. I would bet september may be off the table here. Good to see you. It was was kind of an understatement. I dont think janet yellen is one to jump out and say boo. To Rick Santelli at the bond market at the cme. Lots of data this morning, ricky. How are bonds looking now is. The eci data caught everybody off guard. It is the water cooler topic. Id say about onethird say it is an anomaly, the other twothirds say even if it is we have to Pay Attention to it. No matter how you slice it it had a big impact on the market. A twoday of the dollar index, clearly see how it really got the stuffing knocked out of it around 8 30 eastern but it is making a comeback. It is getting closer to unchanged. Look at 5s and 10s on twoday charts. Down eight basis points on 5s, 10s havent moved at all. If you looked at the s p municipal puerto rican bond index it is at a sixyear low. Should be no surprise but maybe a very interesting weekend in that regard. Rick santelli thank you very much. Im glad we finished with the dollar being down because it is helping gold prices somewhat right now. They are closing to the up side. Gold sitting at 1,094. Moving to the up side by about 5. Nonetheless, it has had a really bad month, down 6 this month sitting near 5 1 2year lows. How is august going to shape up for battered metal . Lets get the traders take. Welcome to power lunch, thomas. When you start to get people calling gold a pit rock you can understand how unloved it is. Is it likely to get any love any time soon . Yes, it will. But it is grinding lower, its not going down the way it did in 2013 because we dont have that overhang of longs. Right now the market has a very low net position. We get these little bounces and it is very data dependent because theyre not quite sure if the fed is going to do it in. September or wait. Every time there is a number it has an influence on the market. Where do you think it will end the year . I think well test that Goldman Sachs called of 1,050 and see if we can get down there. There is a lot of support around those low 1,000 numbers because that was on resistance on the way up from 800. Understood. Check out the s p 500 this year. It has been as you probably know, a choppy ride for investors. Theres the chart. But it is still up 2. 5 year to date. Why it could rally another this is the pinpoint here 9. 5 by the end of the year. Plus the most loved stocks on wall street. The select group of companies that analysts believe will provide outside returns. We will name them later on power lunch. Stay with us. Hi. Hi. Hi. Hello. Hi. Hi. Hi. Hi my names josh. Kelly. My name is raph. Steve. My name is anne. Tom. Brian. Krystal. And i am definitely not a robot. Im one of the real live attorneys you can talk to through legalzoom. Whether its for your business or your personal life, dont let unanswered legal questions hold you up. Because were here. Were here were here and weve got your back. Legalzoom. Legal help is here. What do you got to offer us today . Balance transfer thats my game bank you never heard of, thats my name haa thank you. Uh, next. Watch me make your Interest Rate. Disappear. Theres gotta be a better way to find the right card. Whatever kind youre searching for, creditcards. Com lets you compare hundreds of cards to find the one thats right for you. Just search, compare, and apply at creditcards. Com. A one, a two, a three percent cash back im sue herera. President obama signing a threemonth extension of the highway bill this morning but not before admonishing congress for failing to pass longer term legislation before its august recess. Operate as if were hand to mouth three months at a time which freezes a lot of construction which makes people uncertain, which leads to businesses not being willing to hire because they dont have any longterm certainty. It is a bad way for the u. S. Government to do business. The u. S. Fish and Wildlife Agency says it has been contacted by a representative of the minnesota dentist who killed cecile the lion in zimzimbabwe. Walter palmer has been in solution after being intensely criticized by social media. The government in zimbabwe says it intends to seek his extradition extradition. A longlot of manuscript by f. Scott fitzgerald will be published. Temperature was written a year before fitzgerald died of a heart attack. A surfer seriously injured as he fought off a shark attack off the eastern australian coast. He was taken by ambulance to a local hospital in serious but stable condition after suffering significant wounds to his left leg and also his hand. That is the cnbc news update this hour. Now mandy, i know youre headed back home to australia so stay out of the water. You bet your bottom dollar. It is also winter over there so it is pretty cold. Isnt it shocking. I dont know how many shark attacks that maics it around the world so far this year but it feels like it is a pretty bad year for shark attacks. There have been more this year than the last five years i think they said. Stay out of the water. Have a good trip mandy. Thank you very much. Stocks are holding relatively steady on the final trading day of the month. Certainly big drops in energy names, not helping the dow chevron and exxon. Lets get more on trading action with bob pisani at the new york stock exchange. Happy friday. Unfortunately, the employment cost index was a problem for the stock market although initialty held, look at s p futures. We rose as those numbers came out this morning, disappointing numbers for people wanting a little bit of wage inflation. We moved up about eight points. Dollar dropped, yields dropped. Thats generally very good for Interest Rate sensitive stocks when yields drop. Those are the outperformers today. Utilities, reits telecomes, Home Building stocks are all outperforming today as yields were on the downside. We end the month with a lot of activity in global commodity names. Countries with heavy Commodity Exposure like south africa and chile and emerging Market Countries like malaysia all getting a lot of play today. None of them have performed well at all. No rebound today at all for all the big losers in july. Exploration, production stocks in the oil patch, metals and mining china was a disaster all throughout the month, solar stocks down about 9 as well. Finally i am a little concerned about other sectors that are dropping. Semis and social media. Cyber security. Were ending on not particularly great notes for them. Watch them very carefully next week. Lets find out what else we should be watching. Gina adams and hugh johnson. Thank you very much to both of you for joining us. Gina it really feels like its an incredibly heavy week for earnings but it feels like the markets been particularly hard on misses. Whats that tell you about the sentiment right now . Its pretty consistent with what weve seen all earnings season. The market is very intensely focused on earnings. As much as we can ignore china and ignore greece and ignore all the macro concerns it is really earnings that matter for the s p 500. This has been another week of that. Why are the utilities outperforming . It is not just that weve had a fairly quiet bond week. Utilities companies are actually outperforming earnings expectations as well. The market is very sensitive to earnings and probably will be until we get to that key employment report next week. Thats a key thing to watch. Hugh i know you feel the market is pretty fairly valued. Right . In that environment, how vulnerable do you think the market is to any bad headlines that may come out . Yeah its very vulnerable. I think when i say the market is overvalued or valuation is a problem, im really saying that the up side potential for the market from current levels is really de minimis. Its very very small. When youve got an environment where the growth rate of earnings is so low and were talking about very low single digits. When you are talking about an environment where there is a chance db pret pretty good chance the fed will start to raise Interest Rates, it is really hard to make a case for higher stock prices. That makes the market with current levels with not much up side very vulnerable to any bad news, bad news on earnings or bad news on the employment report or bad news particularly from someplace like china, maybe even greece but china in particular. Whats your rearend target hugh . My yearend target is really around current levels. I quite frankly think well be even a little bit lower than current levels. Not just for 2015 but 2016. Something has to happen mandy, for me to feel better about things. And what has to happen is my outlook for earnings which is the real problem here again, low single signatures lle digits has got to get much stronger. We could have is a dollar decline that could help my earnings outlook. But unless i get a better idea of what earnings are going to be for 2015 or stronger prospects for earnings it is hard for me to make the case for equities at current levels. We really need to be at a lower level to have a possibility of good returns. Gina and hugh well put that on the wish list. Thank you very much for joining us today. Go to powerlunch. Cnbc. Com to see what earnings season is telling hugh about momentum stocks in particular. Over the past six months innovators from across the country have been competing to come up with the next big thing to secure Americas Energy future. The prize 1. 175,000 split among three finalists. Winner will be announced live in the second hour of power. First lets meet another one of those finalists. To introduce us to him or her, Morgan Brennan at the safe Energy Security prize in charleston, south carolina. Morgan. Hey tyler. Thats right. So we are still here at safe Energy Security prize event here in charleston. The focus, energy there is a lot of energy in this room, if i do say so myself. Right, guys . This is a great group. So joining us now, our second finalist andy daga. He has created a Company Called momentum dynamics. There is something sitting on this table thats very interesting. This is a wireless electric vehicle charging system. Whats going on here . What this device does is fulfill the ageold dream of tesla and others to transmit electricity through the air. We can charge the battery of an electric vehicle wirelessly without any cables completely automatically. And actually much faster than a plugin charger. This is so small. It is really seems very portable, develop mobile to me. Your Business Model is really fascinating as well because you are plugging into the electric grid. Does that mean youre speaking to Utility Companies to do that . Utility companies, Major Automotive Companies and all the typical players you would expect to see in the field. If i have my electric vehicle and am looking to charge it do i pay for the energy for the electric use that i plug into . But just like easy pass which charges you in the background so you dont even know it this device doesnt require you to swipe a credit card. So it automatically bills you once a month. That is momentum dynamics. Our second finalist. Right now we have a third finalist, then in the next hour were going to be unveiling who the grand prize winner is. Back over to you. We look forward to that. Appreciate it. It is not just San Francisco real estate thats booming. It is also property in the wine country, too. Josh lipton is live in sonoma with that story. Hi josh. Well tyler, what does 32 million buy you these days in simona county . Im going to show you when power lunch continues. Or stop to find a bathroom . Cialis for daily use, is approved to treat both erectile dysfunction and the urinary symptoms of bph, like needing to go frequently, day or night. Tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. Do not take cialis if you take nitrates for chest pain as it may cause an unsafe drop in blood pressure. Do not drink alcohol in excess. Side effects may include headache, upset stomach, delayed backache or muscle ache. To avoid longterm injury, get medical help right away for an erection lasting more than four hours. If you have any sudden decrease or loss in hearing or vision or any symptoms of an allergic reaction stop taking cialis and get medical help right away. Ask your doctor about cialis for daily use and a free 30tablet trial. So youre a Small Business expert from at t . 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It can be all yours, tyler, for 32 million. In fact this is the most expensive home on market right now in sonoma. Ed cosell the former chief Technology Officer of cisco bought the property in 97, then built the house between 2000 and 2005. Five bedrooms 12 bathrooms, two party barns for entertaining guests. Cosell has a lot of fellow techies as neighbors who are busy buying second homes here in wine country. San franciscos market palo altos market is very strong. Prices are pushing up dramatically. Were feeling as a rip effect some of that up here but its increasing in terms of intenseity intensity. So when those markets boom, it lags a little bit, but we then ultimately boom too. Luxury listings in wine country. Meaning those homes priced at 1 million or more have surged nearly 90 year over year according to sothebys. Why is he selling . Were told hes now semiretired and looking to spend more time in his other home in vienna. Tyler, back to you. Good for him. Josh thank you very much. Want to talk a little bit about puerto rico. It will not be able to make 58 million payment due tomorrow. That may lead to one of the larger municipal restructurings in history. What might might this have on the bond market . Joining us peter hayes, head of the Municipal Bonds group at blackrock, and our own kate kelly. What do you think is going to happen . And if i own one of your funds, what is my vulnerability, if any . I think the first part of what will happen it is going to be very long and protracted. Youre right, it will probably be the longest restructuring the Municipal Market has seen. They have about 73 billion in debt. We think they need to get down to about 40 billion. The question is how do you get there. There are a lot of different structures, the sales tax, the gos. Theres likely to be a lot of litigation. They think they can sit down with each Creditor Group and negotiate a settlement. But i dont see how they would do that. From what im told, there is no real restructuring going on other than with the utility. They think that that may be a model for what they can do with other Creditor Groups sit down with each one individually and adopt a settlement. But with the electric authority theyve been going at it for a year and got nowhere. Now with all ditch kinds of Creditor Groups which are oftentimes very litigious in nature. The answer to your question is it is going to be long protracted, it is going to be difficult. I think there is going to be haircuts top bondholders. What well see with this missed payment is likely a precursor of what youll see. It is a good indication they just dont have the money to pay. What happens if i own back to that other question. If i own one of your bond funds or etfs what is my exposure here i would think much higher if im in a puerto ricoonly bond fund. But if im in a general national mun muni bond, it would be very small. We dont have any commonwealthbacked exposure that would impact the fund. Thats the good news. There are some funds that have exposure exposure. Not ours. I would say in the industry there are some funds. We know who they are. We know their names. Oppenheimer funds. Franklin templeton. Lord abbott. One of the problems is theyre still accruing an income. Now if you dont make that payment is goes into. Nonaccrual. They technically have to restate their nibs and drop them. The shareholder value goes down. Think thats what happens. The puerto rican debt issues have been well telegraphed for a couple of years now. The governor said over a month ago we wont be able to pay over 72 billion overall. Why did some of these bond funds not sell offense two years ago, a year ago, even a month ago . Thats a good question. Its Capital Markets and everybody takes an opposite view. You have too much debt you either grow your way out or you have to restructure. Thats what the governor has said. We have to restructure a debt we cant pay in order to provide basic services to their citizens. Thats our view and what we think it will come down to. Detroit might be a precursor for that. Little bit of a scary one if youre a bond investors. G. O. Bonds being the general obligation. It is a little bit of a scary precedent. You think about what happened for years in south america and in greece this idea of debt repudiation. Is it beginning to creep its way into the u. S. Public finance community as well detroit, puerto rico, theres some other problems out there but important. The health of the market in general, 85,000 different issuers is pretty good a lot better than several years ago. I talked to someone earlier today who knows a lot about restructuring. Took a bet with me that there would be chapter 9 bankruptcy option established for puerto rican entities by november 1st. If not he has to buy me lunch. Chances that he has to do that . I think youre going to have a good lunch somewhere. I wouldnt bet against kate. Have a good weekend. The three most loved stocks on wall street. What are they . Dominic chu knows. Dont you . This chart here is one of those top ones. Were going to bring you that and other names coming up right here on power lunch after the break. Youre driving along, having a perfectly nice day, when out of nowhere a pickup truck slams into your brand new car. One second it wasnt there and the next second. Boom youve had your first accident. Now you have to make your first claim. So you talk to your Insurance Company and. Boom youre blindsided for a second time. They wont give you enough money to replace your brand new car. Dont those people know youre already shaken up . Liberty mutuals new car replacement will pay for the entire value of your car plus depreciation. Call and for drivers with accident forgiveness, Liberty Mutual wont raise your rates due to your first accident. Switch to Liberty Mutual insurance and you could save up to 423 dollars. Call Liberty Mutual for a free quote today at see Car Insurance in a whole new light. Liberty mutual insurance. No students ever done the full hand raise in ap calc. But your stellar notebook gives you the gumption to reach for the sky. Thats that new gear feeling. All hp ink buy one get one 50 off. Office depot officemax. Gear up for school. Gear up for great. Female announcer youre on the right track to save big during sleep trains triple choice sale. For a limited time you can choose up to 48 months interestfree financing on a huge selection of tempurpedic models. Or choose to save hundreds on Simmons Beautyrest mattress sets. You can even choose 300 in free gifts with sleep trains most popular Stearns Foster mattresses. The triple choice sale on now at sleep train. Sleep train your ticket to a better nights sleep nltdz breaking news. Lockheed martin and the marine corps announcing after years of testing the f35b, ten f35s are now declared combat ready, at least in the initial phase. Ten of them. The first squadron for the marine corps saying that during testing, the jets were exceptional on all tests. This is a huge milestone for lockheed martin. This is the most expensive program in pentagon history. The plane has been flying since 2006. There have been several problems redoes. The air force has said never again should we be flying an airplane while we are still developing and testing it. By the marine corps saying its version its getting, the first ten aircraft are now initially combat ready. They are good to go finally. Air force will get their f35s. And those should be ready next year. Then the Navy Component ready by 2018. What a complex aircraft that looks like it must be with the vertical takeoff and landing. The three most loved stocks on wall street. Dom chu, who are they . Which are they . Ive got three of them. The rest youll have to go to cnbc pro to see. Marathon petroleum. Why is it so good when the it is a refining company. These refiners have been doing great as oil prices for west texas intermediate have slid. Number two is a health insurer. M a a big part of that story. United health group is up 51 over the past year. Analysts think on average you could see another 18 pop. Then the best one, 9 out of every 10 analysts who cover this stock say buy. They think it is maybe 8 to o 10 10 higher from here. Allergan. That story is up on cnbcpro. You dont have to go anywhere. Stay here. The number of u. S. Oil rigs online actually rising from a week ago. Five going online but still down more than 900 rigs from a year ago. A potential game changer in the fight to contain ebola. A vaccine trial proving to be 100 effective. Sources telling cnbcs kate kelly that puerto ricos Government Development bank will make a debt payment due tomorrow easing some but certainly not all uncertainty about a debt default. Take a look at shares of apple, up 26 over the past year but there is one big tech investor who just isnt into it. Why. Thats next. And jcpenney stock once left for dead by the markets has had a very nice rebound so far this year. Year to date up 27 . But account company bounce back as a new ceo takes over tomorrow . Well explore that on power lunch. My name is anne. Im one of the real live attorneys you can talk to through legalzoom. Dont let unanswered legal questions hold you up, because were here were here and weve got your back. Legalzoom. Legal help is here. What if there were only one kind of dog . Then it would be easy to know everything about that one breed. But in fact, there are over three hundred breeds of dogs. Because no one can be an expert in every one. An app powered by ibm watson will help vets tap Specialized Knowledge in the cloud for every breed. And whatever else walks, flies or slithers through the door. Ibm watson is working to make medicine smarter every day. No students ever done the full hand raise in ap calc. But your stellar notebook gives you the gumption to reach for the sky. Thats that new gear feeling. All hp ink buy one get one 50 off. Office depot officemax. Gear up for school. Gear up for great. Im melissa lee. Coming up in the second hour of power lunch, a bit bullish on stocks. A fed official says the u. S. Stock market has 10 more up side. Whats a better bet . Reits or builder stocks. All at the top of the hour. Shares of shake shack are surging today. Wednesday marked the end of a companys lockup Expiration Date which some shareholders are allowed to sell their shares for first time. Shake shack hasis set to report earnings on august 10th. Stock up 12. 5 right now. Lets get back to Morgan Brennan live at the safe Energy Security prize in charleston south carolina. Over to you, morgan. Hi mandy. Were here in charleston at safe Energy Security prize event. Joining me now is the third finalist for the grand prize which will be announced next in the next hour. Steve boyd. You have created technology around truck platooning. What is truck platooning what does this Technology Look like . We make each individual truck safer all the time. We tackle is massive amount of oil used in trucks in the u. S. Only 4 of vehicles on the road are trucks but they use over 20 of all of our oil. Dramatic fuel usage. Trying to tackle that and safety as well. We make each individual truck safer all the time wireless communications, vehicle to vehicle communications. We make the truck safer, make that driver more aware. On the long haul managed by our cloud we can link up pairs of trucks, bring them a little bit closer get drafting efficiency around 10 for the rear truck, 5 by5 by the front of the truck. Reducing oil use dramatically. Automated technologies automated cars the idea of an automated selfdriving truck. This is not a selfdriving truck. This is technology that automatic mates the platooning process with the driver still driving. Correct. We are improving the animals of each driver. Driver is still in charge. Improving their awareness of the road and ability to deal with any obstacles. Also create an automatic braking length. The system will detect any kind of obstacle brake the truck to a stop. Linking those systems then together between two trucks so it is partial automation not full automation. You are already speaking to trucking companies. Weve recent taken on a fleet with u. P. S. And are talking with many others. This is poletin technologies our third finalist here the a the safety Energy Security prize event. Stay tuned because well be unveiling the winners next hour. The big unveil. Thank you very much Morgan Brennan. Thats it for the very first hour on the last trading week of the month and the week. The last for a few weeks for you as you go on vacation. Have a great time. Ill miss you. Thank you, ill miss you, too. You will come back. I promise to come back. Have fun down under. Melissa lee. It is 2 00 p. M. On wall street, 11 00 a. M. In silicon valley. Youre watching the second big hour of power lunch. Im melissa lee. Heres what happens happening in the markets right now. Take a look at the Dow Jones Industrial average, down by 34 points. Gold closing in on its worse monthly loss in two years. The one sector leading the markets today, health care. Amgen hitting new highs today. Strong earnings and also possible takeout chatter. Amgen being the target. Thats an interesting one but thats helping health care higher in todays market. A painful month for chinas stock market. All seeing sharp declines in july. Are there opportunities to be found or is investing in china still too risky . John rutledge is a cnbc distributor. Always great to see you. Nice to see you. How you doing . Great. Great. The consensus, john is that the stock market and the chinese economy are different but we are seeing arent we the knockon effects of the slowdown in the chinese economy in the commodities market. Why wouldnt we see the slowdown in other parts of the market . Parts of the chinese mark are very sensitive to Commodity Prices which is oil and commodity sectors. But banks, Life Insurance companies and the like the rest of the companies that make up the big caps are really not so price sensitive and falling prices are good for incomes in china, too. China is slowing. It is going to continue slowing but it is not collapsing. But the market and the economy are really two different stories. Thats true but when we have a discussion about the stock market, john and the governments efforts to intervene there, they essentially gave a mandate to a lot of the big Financial Institutions and mutual funds to take on risk on to their Balance Sheet in the form of buying shares and being locked up in those shares for about six months. Theres also a shodadow Banking System lent out on margins to Retail Investors there. Have we understatementestimated the impact on those institutions . I think weve underestimated the negative facteffect of this big stimulus program. Chinese leaders today are very nempbous ous nervous about slowing growth nervous about the geopolitical issues in the East China Sea and theyre nervous about the stock market. Theyve thrown everything but the kitsch sink from trying to stop this market from falling but of course bubbles dont half pop. This thing is not over yet. Meanwhile these institutions have loaded up on shares whose prices are likely to fall further. I dont think chinese financial stocks are very good bet at all right now. Behind this is something thats really more serious. Its a pooling of Decision Making back to central beijing decisions rather than out in the provinces and the cities where all the growth happens. Thats not good for chinas reforms and Development Long term. Bottom line stay away from chinese stocks and certainly chinese Financial Institutions. Were also watching oil today getting clobbered right now after baker hughes announced an increase in the u. S. Oil rig count. Crude is down nearly. 3 . Chevron down more than 4 after posting its quarterly profit in nearly 13 years. Exxon reported its lowest quarterly profit in six years sending the tok to levels not seen since mid 2012. Steven, have we seen the for oil . I think we are close to the bottom there. Were no you seeing some general trends globally that are broadly helpful so i think were tending to see some clearing. I dont think the overhang is as big as people suspect. I think we may have maybe another 300,000 or 400,000 overhang. Thats good. We saw some discipline coming out of shale producers. Weve seen the market there is slowly beginning to roll over. Weve had truly the quarter from hell for the iocs and just a really awful quarter just about any way you want to classify it. So weve had a lot of bad things happen. We have some clearing now happening. I think one of the big things as your previous guest talked about is whats going to happen here in china because thats a very important demand driver. When you say a lot of bad things have happened what makes you think that the bad things have happened and theyre not going to continue to happen or that were not going to be sort of at this 47 level for quite some time . Is 47 enough to get, for instance, the integrated Oil Companies back with higher profits . No. So why are you saying theres going to be a turn . Really what these stocks all need is a higher price in wti, in brent. Absolutely you are correct. So the issue is there are when does the turn come. Clearly the price that we have right now is not sustainable for anybody. That includes the shale players and that includes the iocs. Everybody had a terrible quarter so clearly the fundamentals point to higher prices. Question is when does that happen and that happens we need to clear the markets first, so get rid of the overhang. I think we are close to that. Then there is a question of how the market reacts to the excess inventories that we built up. We believe that those are less than are generally thought why . Why do you think the excess inventories are less . Is there why do we think theyre less . If you start counting them thats where you come out. You have maybe 120 Million Barrels in the u. S. Maybe 30 in europe. But a lot of those for example in the u. S. Our consumption has gone up quite a bit. That means a little bit more working capital. We have a lot more in the way of pipeline and tank infrastructure. Thats true in some other parts of the world as well. Chinese consumption for example is going up pretty quickly. Our view is that the overhang is the excess inventory is not 300 million, 400 million barrel quantity that the iae or eia would have you think but probably in the 150, maybe up to 250 range. If you look for actual barrels in storage, thats what youll find. Steven kopits thank you for your perspective. Less than two hours left in the trading month and, boy, what a month its been. The dow went on a roller coaster road in july on pace now to close out the month with a slight gain. The nasdaq has been a solid winner. It is on track to gain more than 3 for month. But the big story of course has been the topic that melissa was just talking about, oil. Crude tumbling nearly 20 in july. Now sitting below 48 a barrel. What can we expect next month . Dom chu has an august playbook. Last hour we told you a little bit about what happens with the s p 500 with chinese stocks and also perhaps with gold on a historical basis. Lets broaden out the conversation here. Our data partners at kensho looked at august seasonality over the last five years. Kind of since the end of the financial crisis to give us a more indicative look at the current, recent history in the markets that we currently operate in. If you look at the dow industrials over the last five years, it is only five years of data but again, just since the financial crisis. On average, seasonably not strong, down about 2 overall on average for the month. Positive just 40 of the time. Apple among current members of the dow has been a standout over the last five augusts, up 3. 5 on average. Intel has been the performer among current members of the dow over the last five years. Something to keep in mind some Historical Context overall. Lets look at the nasdaq 100, the qs, on average its been an underperformer as well down down. 3 , positive 40 of the time. Keurig Green Mountain is one of the best performers. Netflix is among top performers as well. Up 8 on average, positive 80 of the time. Discovery communications has posted an 11 drop average, its positive 40 of the time. And oil, a lot of attention will be paid on oil going into the fall. Over the last five years in august crude oil has experienced a 2 decline. Weakness continues. Positive 40 of the time. Thank you. Should you pile into the market or sit out the dog days of summer . Two different takes here. John well start off with you. 10 . Whats going to take us higher . I think what will take us higher is improvement in e as we get into the second half of the year. We are getting a lot of the bad stuff out over the summer and when we come in to the second half of the year well see improvement in earnings, Economic Data will persist pushing the giving us evidence that the economys growth is sustainable. Youve got overweights in what our consensus longs, Information Technology consumer financials. Straight to your contrarian play thats materials. What makes you think thats the place to be . What else is going on if you look at the materials sector particularly xlb, the s p 500 tracker in terms of etfs. It is 70 some chemicals. Chemicals benefit from lower oil prices, for one, as well as economic growth. As the Global Economy keeps coming back weve got growth getting more positive all the time, coming out of europe. It gets all the noise of greece out of the way. Youve got japan is in a growth mode now. All very modest but significant improvement over where we have been. Hikely have we seen Chemical Companies though do really well with this backdrop as we see wti down 50 in the past year. Just off the top of my head for dupont, they hit a new low this week. Theyve had a huge battle with activists. Also if you consider the materials sector was one of the top three top four best performing sectors, up until about just a month and a half ago. It was reflective of the discount mechanism you find in equities. We dont see a recession on board. So without that bear market we say no. Interesting contraryian materials. Lets bring in our bear now, eric irvin, ceo of reality shares. Eric, you sort of think john is full of too much optimism. Yeah. I think what we really have to focus on right now, if you think about this question it is really two realities. The reality of how companies are doing which can be completely independent of the reality of how stocks are performing. If you look at this dividends equal reality when it comes to business performance. Dividends are record highs, 5 year to date up probably 10 by year earned but that doesnt necessarily mean that stock prices are a great place to be. In fact we look at the different realities of the stock market and thats all about behavior. Right now the behavior of the stock market is trending negative. It is not that the price of the stock market is trending negative. It is that as the sectors start to perform negatively they continue to perform more negatively so velocity on the downside is increasing and thats going to probably drive some nervous nellie investors off to the sidelines. What worries you more even than a kind of soggy profit picture is your concerns that internally at least two and maybe three of the important subsectors energy utilities, Health Care May be getting close to what you describe as bear market territory or signals. I would throw in materials as well as another one to be worried about. Yeah exactly. In fact health care which has been of course the best performer, the darling of the s p 500 year to date is actually one of our most worrisome. And the reason for it is not because of the overall performance or the trend is breaking down. Its because as markets sell off, and as health care goes down the downside continues to increase which means there is a lot of conviction there. That i think is key. Weve already had two sectors break down and indicate a bear market territory. One more sector and then that would signal to us its time to be out of the market entirely. But let me ask a sort of contrary question. Can you have sort of bear markets within sectors or a breakdown within a sector without having a breakdown in the Broader Market . In other words, it be a contained event . Yeah absolutely. So as we track and we score each of the different ten sectors, we look at these two things. Price, the behavior of the price so are the trends breaking down or are they persisting. Then the other is of course this downside volatility. If you look at it there have been many times when one, two sectors broke down but only at the times when all three of the ten sectors have broken down is it time to completely get out of the market. Like i say, Equity Investors have are unhedge that are unhedged are on a tight rope. Bear market territory for health care is not really what youre saying. Youre saying there are worrisome signs within it that are not showing up in the prices of those stocks. Am i getting you right . Thats precisely it. It is not bear market territory. What it is it is a bear market indicator. Right. Got it. Thank you, eric. Good luck and we hope youre wrong. No. We appreciate you with being with us. Lets set the table for the rest of the hour. The good the bad and the ugly in todays trade. Three stocks that fit the bill ahead. And why apple is nowhere to be found in one big Cap Investors playbook. Hell tell you why. And were closer to crowning this years winner of the safe Energy Security prize. The big reveal is coming up when power lunch returns. Hi my name is tom. Im raph. My name is anne. Im one of the real live attorneys you can talk to through legalzoom. Dont let unanswered legal questions hold you up, because were here were here and weve got your back. Legalzoom. Legal help is here. My name is jamir dixon and im a locate and Mark Fieldman for pg e. Most people in the community recognize the blue trucks as pg e. My truck is something new. Its an 811 truck. When you call 811, i come out to your house and i mark out our gas lines and our electric lines to make sure that you dont hit them when youre digging. 811 is a free service. Im passionate about it because every time i go on the street i think about my own kids. Theyre the reason that i want to protect our community and our environment, and if me driving a that truck means that somebody gets to go home safer, then ill drive it every day of the week. Together, were building a better california. We promise you the good the bad and the ugly in the market on this friday. Here we go. First to the good. Expedia enjoying a nice pop after reporting an earnings beat. The travel website also raising its dividend to 24 cents a share. It is up almost 11 on the session. Now to the bad. Fireeye sinking after the Cyber Security firm reported its smallest Revenue Growth since going public in 2013. Fireeye also announcing its chief Financial Officer stepping down. Finally, a downright ugly day for linkedin investors. The stock taking a big hit despite posting an earnings beat. The results came from a onetime acquisition and not because of a recovery in its core business. One analyst downgrading the stock today. Youll hear more about that call later in street talk. Thats a tease, tyler. Shares of apple down about 3 this month but according to buzzfeed the company will unveil the next version of apple tv in september. Is that a potential catalyst for the stock . Eric jackson, great to see you. It really sounds like according to the notes ive got you really like apple as a stock. What are you waiting for . Is apple tv going to be the catalyst to get you back in . I like the company. I look the all the operational directives that tim cook has made. I think apple tv is a great product and will be a great product when it comes. But i dont own the stock and i cant get excited about owning the stock because i think that the one big mistake that tim cook has made over his tenure as ceo is that hes wasted now 130 billion on apples dividend and stock buyback policy. I dont think it has created any extra value for shareholders. One interesting thing is if you look back to september of 2012 almost three years ago, and you look at what their cash levels were about 120 billion then. Theyre 200 billion now. Theyre up about 80 billion but theyve taken on another 55 billion in the credit card in terms of debt to fund their buybacks. And giving it i a way through a drivethrough window. Every company in the s p 500 is doing that essentially. Because borrowing costs are so low and cash is overseas. Yeah. But the net result though melissa is that the increase in market cap between that point and now is about 130 billion. It is equal to this kind of bump up in cash and the debt that theyve taken on. And the even though its even dabitda is 50 more than it was a year ago, i think they should have been using that money on m a. Thats something investors would get excited about, not just this financial engineering. Were you in apple at some point and when did you get out of apple if you were in apple . I was in apple for a long part of the runup starting in 200910. I got out after the it started to break down after september 2012. I got out after that. I have not been in it for the downturn and the subsequent rampup. I like the company but, they could have used that 130 billion to buy facebook tesla, twitter and have lots left over. They spend 32 billion on a onetime dividend. They could have taken that 32 billion, they could have bought up every single Internet Company that existed at that time except for google. But instead they shoved it out the door. What do they have to show for it . Apples got to use its cash as a strategic weapon and not to appease carl icahn or wall street in this sort of false believe that its going to prop up its share price. Always good to get your perspective, eric. Thanks for your time. Thanks. Up next the multimillion dollar battle thats brewing on wall street. Well go to the front lines of the messaging wars ahead. We are just minutes away from crowning the winner of this years safe Energy Security prize. Who will take home a 125,000 check . Stick around to find out. Power lunch is back in two. There are the worthy competitors. Can it make a dentist appointment when my teeth are ready . Can it tell the doctor how long you have to wear this thing . Can it tell the Flight Attendant to please not wake me this time . The answer is yes, it can. So, the question your customers are really asking is can your business deliver . The s p 500 down by. 2 . Energy stocks are down by just under 2 . Youve heard of shake shack . How about snake shack . Sneaky snake slithers its way to a luxury Apartment Building in houston. Authorities are not sure how this twofoot long cobra cobra got into the highrise or who it belonged to. Maybe it belonged to nobody. Maybe it was just a cobra. Cobras are native to Southeast Asia and they of course can be deadly. Police were called in. Before snake could do any harm. Cobra has been repatriated somehow. Melissa. Scary stuff. A symphony in california is generating a lot of buzz on wall street. Its not going to do with music and everything to do with a firm thats backed by 14 Financial Firms including goldman, citadel and blow and palo alto. Mary tomorrow some sat down with symphonys ceo to find out whats the buzz. Any product looking to compete with wall streets most popular instant messaging system needs to be fast secure and compliant with regulators rules across the globe. The ceo says his system meets those requirements starting with the firms unique way of keeping users messages safe until they are received. What we have done is we encrept data before it leaves your computer. This enables data to be en encrypted only by the recrip enter of the data. While the data is in transit or at rest when it is stored into a server it is not possible to decrypt the data. He says all messages sent stored and all activity will be reported provide region regulators with a path to ferret out any potential wrongdoing. So any communication has to be recorded and be made available in a Retention System an then when the resengstention system has to provide are the logs so regulators can analyze them if there is any inquiry. Symphony doesnt have all the proprietary data that justifyies the firms 20 billion pricing tag. All at a price of 10 to 20 a month. If wall street likes that system some say that could pull a plug on bloombergs dominance on wall street. Well have to see. Final oil trades are crossing for the week. Headed to the nymex for the crude close when power lunch returns. Can a business have a mind . A subconscious. A knack for predicting the future. Reflexes faster than the speed of thought. Can a business have a spirit . Can a business have a soul . Can a business be. Alive . Hello, everyone. Im sue herera and here is your cnbc news update at this hour. A man who escaped from a pittsburgh area prison and is accused of murder while on the run has been caught. Robert christman was fleeing in a stolen pickup truck when he crashed into the rear of a Police Cruiser and lost control. He escaped Tuesday Morning with just a few days left in his sentence. Democratic president ial hopeful Hillary Clinton calling on congress to end the u. S. Trade embargo against cuba. The position puts her in line with president obama but draws a sharp contrast with republican president ial candidates marco rubio and jeb bush. Oxford university has released recently filmed footage of cecile the lion at the National Park in zimbabwe. Researchers from the universitys Wildlife Conservation unit were track being the lions movements before it was killed by an american dentist, walter palmer. Facebook founder Mark Zuckerberg is going to be a dad. He posted a picture with his wife pricilla on facebook with the announcement that they are expecting a baby girl. He said that theyve been trying to have a child for a few years. Having endured three miscarriages along the way. We certainly wish them all the very best. That is the cnbc news update at this hour. Back to you, melissa. Sue herera thank you. Breaking news on uber. Lets get to dom chu. The bottom line here the value use just keeps growing. According to a report from dow jones citing people familiar uber has raised close to 1 billion bringing its tote it will raised to 5 million. The company is valued at nearly 51 billion. Again after this latest estst round of financing. Among reported investors in this round include microsoft as well as Indian Media Company bennett coleman. Also this latest uber valuation the story goes on that say equals facebooks record for private mentor backed start up raising funds. Uber raise as close to 1 billion bringing its total to mar than 5 billion raised and its new funding round values the company at over 51 billion. Back over to you. Thank you very much dom. Oil falling to end the week. Closing trades crossing right now. Jackie deangelis is all over it. Live at the nymex. Hi good afternoon, tyler. 47. 12 is where wti settled. It was down 1. 40 on day. We even briefly dipped under 47 a barrel. What does this tell you going into the weekend . Selling pressure was on. We couldnt really hold on to the gains we saw earlier in the week. A couple of things concerning oil traders today. First one would be baker hughes reporting oil rigs went up again. We saw an addition of five oil rigs. We need to be seeing this go in the other direction, they told me even though oil rigs are down more than 50 year on year. This is not necessarily good news. Also two nuggets we got from exxon and chevron, one exxon is conserving cash. Thats a negative sign in terms of what the company things will happen to oil prices. Chevron, the charges were triggered by a downward revision of its oil price. This is negative news going into the weekend. Back to you. Jackie deangelis, thank you. Time for trading nation. Utility stocks are soaring for sixth straight day and a twomonth high right now. Rich ross is looking at the charts gina sanchez is on the fundamentals. Gina, what is going on with utilities and does it have to do with the fed . It definitely has everything to do with the fed. This is representing a shift in investor sentiment. Up until now utilities have really been facing the expectation of higher yield and a fed hike. At some point there were even talks about the fed hike as early as june. That sent money flying out of utilities. What we are seeing is a shift back into the idea that in fact we saw some wage inflation, we continue to see mixed data some up, some down and it is not painting a clear picture for a fed hike. This is clearly showing investors are now pushing that idea out farther. That means that the dividend yield of utilities now looks really attractive and people are coming back in. Rich, what do you seep in the in the charts . Utilities should be viewed as a summer rental here lets not fall in love. Clearly this is a function of Interest Rates. On a day like today with an historically back eci print, thats a great thing to be. Were putting pressure on dollar, driving Interest Rates lower and putting a bid into utilities. We see buying from long onlies when those yields on the 10year get down around 2. 20, we get Short Covering from the hedge funds. Look at the xlu, yes, its been constructive here in the short term, a nice little bottom there, but tons of resistance come in right overhead. You have the 150day moving average. Trend remains to the downside. I think the real important chart for the utilities is the longer term weekly. We see a 17 pullback right to this key area of support at the 150. 150week moving average. Thats defined the trend for almost five years. The big trend does remain higher about you keep those expectations in check. The specter of higher Interest Rates at some point whats that level, rich . We dont have the chart up. Whats that level that its got to hold . On the xlu with be lets keep it 40. Still 10 lower from here so you wouldnt feel so good on a test. But above that big trend is in tech. You want to be a buyer. Thanks so much. Coming up weve introduced you to the finalist in the securing Americas Future Energy competition. Morgan brennan is about to reveal the winner. Hi morgan. Hi tyler. Thats right. See this big checking . 125,000 . One of the three finalists weve spoken to is going to win this. Is everyone here excited to hear the results . More when power lunch returns. After the break. Every Auto Insurance policy has a number. But not every Insurance Company understands the life behind it. Those who have served our nation. Have earned the very best service in return. Usaa. We know what it means to serve. Get an Auto Insurance quote and see why 92 of our members plan to stay for life. Take a look at the ipo of the day at the nasdaq. Terraform global specializing in emermging market assets in hydroelectric wind as well as solar. Tough day for trade, down 6 . Sun sunedison shares are down 8 . For the month, sunedison is down by 20 . Time to crown this years winner of the safe Energy Security prize. Lets go back to Morgan Brennan live in charleston south carolina. Hi morgan. Hi, tyler. Thats right. Were here getting ready to unveil the winners of the safe Energy Security prize. Just to recap, we had three finalists. Pelocontinue tech pelotin tech lchlt we have a price pies of 175,000. The first place winner will walk away with a 125,000 check. This has been generously donated by the Intertech Group and the zucker family who are bearers of the check here behind me. Just to recap, two panels of expert judges and 50,000 votes from the public. Here we go. The second runnerup is pelotin technologies. Congratulations. Thank you very much. Thank you. Youll be taking home 15,000 today. Congratulations. We are going to jump right to the grand prize winner. The grand prize winner is momentum dynamics. Congratulations congratulations to both of you. Thank you very much. Thank you. If you wouldnt mind taking this check, i have to just ask you what you are going to do with this money . What is the first thing you are going to do when you take this check home to cash it . I have to talk to my wife about that. Okay. Fair enough. When can we start to see your technology out on the road out in parking garages, just around and about . I think youll start to see some pretty interesting things in 2016. Great. Anything else that we should add about this . Is it going to just start here in the u. S. Or will we be seeing this throughout the globe . We are getting tremendous interest from asia and europe. I think what youll see is a gradual transition to Wireless Charging over the next five years. Great. Andy daga of momentum dynamics, graigs congratulations congratulations for being the first prize winner of the safe Energy Security award. Well done morgan. That was my choice there. It is the wirelessness of it that really appealed to me the Wireless Charging that got andy daga i think that prize. Good news for tattle tales in california. A new tool will help you rat on your neighbor for wasting water. Well have that story. Plus diana olick will look at the best investments in housing. Thanks to the tools and help at experian. Com, i know i have an 812 fico score, so i definitely qualify. So what else can you give me . Same day delivery. The ottoman . Thank you. Fico scores are used in 90 of credit decisions. So get your credit swagger on. Go to experian. Com become a member of experian credit tracker and take charge of your score. You focus on making great burgers, or building the best houses in town. Or becoming the next highlyunlikely dotcom superstar. And us, well be right there with you helping with the questions you need answered to get your brand new business started. Were legalzoom and weve already partnered with over a million new Business Owners to do just that. Check us out today to see how you can become one of them. Legalzoom. Legal help is here. If youre a farmer in southern russia you already have to deal with the economy, the heat and now locusts. Russian authorities are trying to fight the storm. One pilot hired to spray insecticide in the region says some of the locusts are the size of small birds and theyre hard to kill. As soon as the insecticide kabts the swarm of locusts, they just move farther to the south. On to housing now. After a week filled with earnings from the big builders as well as big multifamily reits we ask whats the better bet right now . Owning a home or renting . Home builder stocks or reits . Diana olick is live in washington with some thoughts. Di . Reporter hi ty. Look, it is a tough one. Clearly they both have room for growth with demand for overall housing increasing but investors have been more skittish so far on the multifamily reits and more bullish on the Home Builders. Look comparing year to date stocks of big builders like lennar, dr horton both up 16 , Toll Brothers up 13 . They are arguably beating those of reits like avalon bay up 5 Equity Residential up 3 and Essex Property trust up 8 . Still good but not as strong. The growth in apartment construction though in the past three years has had investors nervous that the nation is on the verge of an oversupply of units which could lead to lower occupancy and lower rents. Rents right now and occupancies are at current highs. Multifamily construction was next to nothing during the new housing boom and there is the argument that these units are making up for pentup demand. On the Single Family side Home Builders have been pretty much strong across the board but in quarterly reports out this week we saw some disappointment on new order side an that may be due to the jump in Mortgage Rates in may and still rising home prices on new and existing product. Weve said over and over that home prices are rising faster than income growth. While employment is improving it is not exactly going gangbusters. Tight supply on very low end of the market is also keeping firsttime buyers side lined. You need tose buyers so that moveup buyers can go after those brandnew pricier homes. We put up a poll on cnbc. Com. Where would you put your money . Apartment reits the clear winner. Theyre at 48 . Builder stocks 21 . Neither, 31 . Thank you very much diana. Over to you, melissa. Coming up next, what you should doing in housing right now. Power lunch will be right back. We just heard how investors will be bullish on more stocks. Lets bring in the associate director and senior reit analyst. Great to have you with us. The stocks have been doing better. The builder stocks have been doing better than apartment reit stocks. Where do you stand on this question, this debate . Thank you for having me on. When we look at the reits we see a group that was doing well and and hit by Interest Rate concerns. If you look at the reits and how the apartments have done they have done quite well relative to the rest of the reits because the fundamentals have been better this year than last year. We have seen a resurgeance, they have all increased guidance and beaten analyst estimates for the quarter because of the second wind that apartments are having because there is a focus of the reits of owning assets in urban areas where millennials are finding jobs. Buying a house is not what it was a decade ago and you have a shortage of supply. To put that in perspective we have about 7 million more target renters meaning the 20 to 34 year olds than a decade ago and yet we are only building 70,000 more units over annual average than over a 20year period. Andy is my brother. He gets the credit for that. You enjoy that. Alex i want to ask you in terms of these particular reits are these reits that hold on to the units and rent them out themselves or do they sell the Apartment Units to investors who then in turn rent . These are long term landlords. They own apartments and rent them out and have very Good Property operating services so if residents have an issue 24 7 they can get a tech to fix whatever it is. They provide a high degree of customer service. When people rent there they know they will get Excellent Service on par with Top Quality Hotel which is a comfort to the residents and helps lower turnover which increases cash flow. Im sure in some cities there is overbuilding going on perhaps, maybe rent getting to the point where it is tipping the advantage to home owning as opposed to renting. Are there markets where you are concerned about . The only market right now that is really experienced sort of an oversflie is d. C. What you have down in d. C. Is a lack of job growth. When you look at a market like seattle where a year ago there was a lot of concern over construction and new supply job growth has surged this year and that is no longer an issue. As long as we have job growth the supply will take care of itself. Great to see you. Thank you. Regards to your brother, andrew. Tyler over to you. Very nice. Shares of j. C. Penney. Reporter and this store has been open for your years. In those four years it has seen three Ceos Marvin Elson takes over tomorrow though he has been crafting the current back to school and upcoming holiday strategies directly with ulman over the past ten months as president ceo designee and a member of the j. C. Penney board. Prior to j. C. Penney he spent 12 years at home depot and 15 years at target mainly in logistic roles. Some are concerned about his lack of merchandise experience. Ellison has a lot of work to do. While shares are up more than 25 this year the stock is 90 below the alltime high hit in 2007 and it shed an additional 40 under his second tenure at the company. At its peak j. C. Penney generated 32. 3 billion in 2003. Last year annual sales were 60 of that level. I spoke with Marvin Ellison and he says he plans to set aggressive financial goals to restore the company to profitability and he wants to reestablish j. C. Penney in the american retail landscape to the stature he believes it truly deserves. Thanks so much for that. An official website is launched in california allowing people to report their neighbors who wastewater but jane wells is looking at winners and losers from the drought. Reporter we are going to look at winners first. Californians are being ordered to slash consumption but most apartment dwellers are not metered. What you are looking at here are cold and hot water meter. Reporter ceo of nwp which meters individual apartments. Average consumption drops as much as 20 and makes money adding small fee to tenant water bills. The plan is to expand the system and make smart apartments. So imagine when you moved out of an apartment we would start lowering the thermostat to more ambent temperature that is more conservation minded. It is an investment and is very difficult to measure whether or not we are making money. We hope the resident is conserving water. Reporter drought losers organic produce because this is where most of it is grown and that is hurting Companies Like daily greens which whole foods has invested in. It may change out some ingredients. As of this summer celery and cucumber are at an alltime high. Over the last couple of years things have gone up probably about 50 . Who knew . She doesnt want to pass along costs. Martin has cut costs but that could eevaporate some margins. Nice jane wells. Thank you. Time for street talk the Analysts Recommendations on stocks you need to know about. We start with linked in. Lots of reports after earnings. A downgrade to a hold. The analyst points out back half revenues were lowered again. Ditto, by the way for the ebida which is lowered again. The valuation too risk. Zillow cowan downgrading to under perform. Sees risk of Slower Growth cutting price target to 60 a share. It is 82 right now. That sounds like a sell. Regal shares have under performed but as seen in q 2 a 10 growth reflects new initiatives like expanded menus and alcoholic beverage options and is poised to regain market share. And go pro Citi Upgrades to buy. Flying cameras and Virtual Reality 90 a share, about a 40 upside from where it is trading right now. Tonight at 5 00 on fast money have you seen the chart of mcdonalds . This is a new high. Have you seen the chart of shake shack up double digit percentages. We will go fast casual at 5 00 on fast money. Thanks to you for watching. Closing bell starts right now. Have a great weekend. And welcome to the closing bell on this friday. And im bill griffith. July coming to a close. I think there is a law of physics that time in summer time goes faster than time in winter time. Doesnt it feel like that . Coming to the close for the month. It has been a pretty good month for the bulls in equities despite the s p and nasdaq making a run. And dow is the lagger the fault of exxon and chevron weighing down the